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tlry-10q_20200930.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)

☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2020

☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-38594

Tilray, Inc.

(Exact Name of Registrant as Specified in its Charter)

Delaware

82-4310622

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

1100 Maughan Road

Nanaimo, BC, Canada, V9X IJ2

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (844) 845-7291

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading

Symbol(s)

Name of each exchange on which registered

Class 2 Common Stock, $0.0001 par value per share

TLRY

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 9, 2020, the registrant had 133,526,319 shares of Class 2 Common Stock, $0.0001 par value per share, outstanding.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION		1
Item 1.	Condensed Consolidated Financial Statements (Unaudited)		1
	Condensed Consolidated Balance Sheets		1
	Condensed Consolidated Statements of Net Loss and Comprehensive Loss		2
	Condensed Consolidated Statements of Stockholders’ Equity		3
	Condensed Consolidated Statements of Cash Flows		4
	Notes to Condensed Consolidated Financial Statements		5
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		27
Item 3.	Quantitative and Qualitative Disclosures About Market Risk		42
Item 4.	Controls and Procedures		43
PART II.	OTHER INFORMATION		44
Item 1.	Legal Proceedings		44
Item 1A.	Risk Factors		46
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds		73
Item 3.	Defaults Upon Senior Securities		73
Item 4.	Mine Safety Disclosures		73
Item 5.	Other Information		73
Item 6.	Exhibits		74
Signatures			76

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

TILRAY, INC.

Condensed Consolidated Balance Sheets

(in thousands of United States dollars, except for share and par value data, unaudited)


	September 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	155,205		$	96,791
Accounts receivable, net of allowance for credit losses of $826 and provision for sales returns of $1,212 (December 31, 2019 - $615 and $1,400, respectively)		24,805			36,202
Inventory		89,917			87,861
Prepayments and other current assets		28,154			38,173
Assets held for sale		6,797			—
Total current assets		304,878			259,027
Property and equipment, net		187,630			184,217
Operating lease, right-of-use assets		18,460			17,514
Intangible assets, net		180,853			228,828
Goodwill		159,595			163,251
Equity method investments		8,911			11,448
Other investments		22,710			24,184
Other assets		4,324			7,861
Total assets	$	887,361		$	896,330
Liabilities
Current liabilities
Accounts payable		26,137			39,125
Accrued expenses and other current liabilities		32,526			50,829
Accrued lease obligations		3,230			2,473
Warrant liability		71,636			—
Total current liabilities		133,529			92,427
Accrued lease obligations		30,075			29,407
Deferred tax liability		48,090			53,363
Convertible notes, net of issuance costs		438,154			430,210
Senior Facility, net of transaction costs		45,944			—
Other liabilities		4,852			5,652
Total liabilities	$	700,644		$	611,059
Commitments and contingencies (refer to Note 18)
Stockholders’ equity
Class 1 common stock ($0.0001 par value, 233,333,333 and 250,000,000 shares authorized, respectively; 0 and 16,666,667 shares issued and outstanding, respectively)		—			2
Class 2 common stock ($0.0001 par value; 500,000,000 shares authorized; 133,289,944 and 86,114,560 shares issued and outstanding, respectively)		13			9
Additional paid-in capital		911,171			705,671
Accumulated other comprehensive income		2,689			9,719
Accumulated deficit		(727,156	)		(430,130	)
Total stockholders’ equity		186,717			285,271
Total liabilities and stockholders’ equity	$	887,361		$	896,330

The accompanying notes are an integral part of these condensed consolidated financial statements.

TILRAY, INC.

Condensed Consolidated Statements of Net Loss and Comprehensive Loss

(in thousands of United States dollars, except for share and per share data, unaudited)


	Three months ended September 30,						Nine months ended September 30,
	2020			2019			2020			2019
Revenue	$	51,406		$	51,101		$	153,922		$	120,043
Cost of sales
Product costs		34,224			35,047			108,616			85,806
Inventory valuation adjustments		13,443			201			36,116			726
Gross profit		3,739			15,853			9,190			33,511
General and administrative expenses		12,665			20,122			49,030			49,618
Sales and marketing expenses		10,000			16,974			40,709			39,161
Research and development expenses		921			2,315			2,831			4,891
Stock-based compensation expenses		8,080			8,644			23,404			22,303
Depreciation and amortization expenses		3,425			3,200			10,353			7,457
Impairment of assets		—			—			58,210			—
Acquisition-related expenses (income), net		—			(13,454	)		—			(6,566	)
Loss from equity method investments		1,420			1,837			4,495			1,837
Operating loss		(32,772	)		(23,785	)		(179,842	)		(85,190	)
Foreign exchange (gain) loss, net		(9,319	)		2,585			5,424			1,153
Change in fair value of warrant liability		(31,913	)		—			51,275			—
Interest expenses, net		10,437			8,680			30,147			26,005
Finance income from ABG		—			(210	)		—			(557	)
Other expense (income), net		(38	)		(1,116	)		4,944			(6,185	)
Loss before income taxes		(1,939	)		(33,724	)		(271,632	)		(105,606	)
Deferred income tax expenses (recoveries)		134			2,432			(4,013	)		(3,987	)
Current income tax expenses (benefit)		243			195			505			402
Net loss	$	(2,316	)	$	(36,351	)	$	(268,124	)	$	(102,021	)
Net loss per share - basic and diluted		(0.02	)		(0.37	)		(2.23	)		(1.05	)
Weighted average shares used in computation of net loss per share - basic and diluted		129,100,909			98,130,507			120,128,856			96,742,626
Net loss	$	(2,316	)	$	(36,351	)	$	(268,124	)	$	(102,021	)
Foreign currency translation gain (loss), net		2,265			(4,863	)		(7,184	)		(2,414	)
Unrealized gain on available-for-sale debt securities		193			11			154			80
Other comprehensive income (loss)		2,458			(4,852	)		(7,030	)		(2,334	)
Comprehensive income (loss)	$	142		$	(41,203	)	$	(275,154	)	$	(104,355	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

TILRAY, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(in thousands of United States dollars, except for share data, unaudited)

	Common stock				Additional			Accumulated other						Total
	Number of shares		Amount		paid-in capital			comprehensive (loss) income			Accumulated deficit			stockholders' equity (deficit)
Balance as of December 31, 2018		93,170,867	$	10	$	302,057		$	3,763		$	(108,177	)	$	197,653
Cumulative effect adjustment from transition to ASU 2016-01		—		—		—			803			(803	)		—
Cumulative effect adjustment from transition to ASC 842		—		—		—			—			19			19
Shares issued for Natura acquisition		180,332		—		15,100			—			—			15,100
Shares issued for Manitoba Harvest acquisition		1,209,946		—		96,844			—			—			96,844
Shares issued for ABG Profit Participation Agreement		1,680,214		—		125,097			—			—			125,097
ABG finance receivable, net of finance income of $2,700		—		—		(30,292	)		—			—			(30,292	)
Shares issued under stock-based compensation plans		545,000		—		931			—			—			931
Shares issued for employee compensation		11,868		—		649			—			—			649
Stock-based compensation expenses		—		—		5,736			—			—			5,736
Other comprehensive loss		—		—		—			(456	)		—			(456	)
Net loss		—		—		—			—			(29,369	)		(29,369	)
Balance as of March 31, 2019		96,798,227	$	10	$	516,122		$	4,110		$	(138,330	)	$	381,912
Shares issued under stock-based compensation plans		530,943		—		3,483			—			—			3,483
Shares issued for investment acquisition		28,361		—		70			—			—			70
Stock-based compensation expenses		—		—		7,923			—			—			7,923
Other comprehensive income		—		—		—			2,974			—			2,974
Net loss		—		—		—			—			(36,301	)		(36,301	)
Balance at June 30, 2019		97,357,531	$	10	$	527,598		$	7,084		$	(174,631	)	$	360,061
Shares issued for common stock at-the-market, net of issuance costs		1,344,166		—		37,445			—			—			37,445
Shares issued for Manitoba Harvest acquisition		899,306		—		31,866			—			—			31,866
Shares issued for investments and S&S acquisition		433,338		—		14,438			—			—			14,438
Finance income for receivable for ABG Profit Participation Arrangement		—		—